Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.
What Are North Dakota Bid Bonds?
A lot of time, effort, and money go into selecting a contractor through competitive bidding, whether the project owner is a state or local government contracting authority or business entity. Both may often require contractors bidding on their job to furnish a bid bond. A bid bond is a guarantee by the contractor (referred to as the bond’s “principal”) that:
- The bid submitted by the contractor is complete and accurate,
- The contractor is qualified to purchase performance and payment bonds, and
- The contractor will accept the job if chosen as the winning bidder.
The intent is to provide financial protection for the project owner (the bond’s “obligee”) against unanticipated costs of not being able to proceed to contract with the winning bidder. A principal who doesn’t live up to this guarantee is legally obligated to compensate the obligee for monetary damages incurred as a result.
Who Needs Them?
State and local government contracting authorities and private project owners alike can require contractors submitting bids in a competitive bidding situation to furnish a bid bond along with their bids. A bond amount equal to five or ten percent of the contractor’s bid price is the norm.
How Do North Dakota Bid Bonds Work?
There are three parties to a North Dakota bid bond, the third one being the bond’s guarantor (called the “surety”). The surety guarantees the payment of a valid claim by agreeing to extend credit to the principal. The usual practice is for the surety to pay the obligee initially, even though the legal obligation to pay it belongs entirely to the principal. The principal must subsequently repay the resulting debt according to the surety’s credit terms or risk being sued by the surety.
How Much Do They Cost?
The required bond amount is set by the project owner, who is also the obligee for the North Dakota bid bond. Typically, this represents 5% or 10% of the overall bid sum.
However, Surety Bond Professionals offers bid bonds at no cost. These bonds are often given with the idea that you will purchase P&P bonds in order to proceed with the project if you are granted the contract.
The contractor’s personal credit history is the main factor taken into account when underwriting smaller contracts and ventures. For larger projects, the location of the project and the stability and creditworthiness of the contractor may be further looked into by the assurance’s underwriters to determine the ultimate cost.
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